U.S. suspends trade, investment talks with Russia over Ukraine

Tribune wire reports

(Reuters) - The United States has put trade and investment talks with Russia on hold as a rebuke for Russia's incursion into Ukraine, a U.S. official said on Monday.

"We have suspended upcoming bilateral trade and investment engagement with the government of Russia that were part of a move toward deeper commercial and trade ties," a spokesman for the Office of the U.S. Trade Representative said.

President Obama said Russia has violated international law in its military intervention in Ukraine and said the U.S. government has warned it will look at a series of economic and diplomatic sanctions that would isolate Moscow.

Russian President Vladimir Putin needs to allow international monitors to mediate a deal in Ukraine acceptable to all Ukrainian people, Obama told reporters before he met with Israeli Prime Minister Benjamin Netanyahu.

"Over time this will be a costly proposition for Russia. And now is the time for them to consider whether they can serve their interests in a way that resorts to diplomacy as opposed to force," Obama said.

European Union foreign ministers also held out the threat of sanctions against Russia on Monday if Moscow fails to withdraw its troops from Ukraine, while offering to mediate between the two, alongside other international bodies.

At talks on the Ukraine crisis in Brussels, they agreed no deadlines or details about any punitive measures that could be put in place against Russia, but leaders of the bloc's 28 nations will hold an emergency summit on Thursday and could take further decisions.

The EU discussions were convened abruptly after Russian President Vladimir Putin seized the Crimean peninsula and said he had the right to invade Ukraine.

"We need to see a return to barracks by those troops that have currently moved (from) where they have been staying," the EU's foreign policy chief Catherine Ashton told reporters after the foreign ministers' meeting in Brussels.

"There are serious concerns about overflights, about reports of troops and armed personnel moving."

In Monday's talks, EU governments sought to strike a balance between pressuring Moscow and finding a way to calm the situation.

"We want the situation to de-escalate to the position the troops had before this began," Ashton said.

Europe's approach leaves it at slight odds with the United States, after U.S. Secretary of State John Kerry threatened visa bans, asset freezes and trade restrictions against Russia, which he accused of 19th century behavior in Ukraine.

Germany, France and Britain, the EU's most-powerful nations, were advocating mediation, possibly via the Organization for Security and Cooperation in Europe (OSCE), while not ruling out economic measures if Moscow does not cooperate.

"Crisis diplomacy is not a weakness but it will be more important than ever to not fall into the abyss of military escalation," German Foreign Minister Frank-Walter Steinmeier told reporters as he arrived in Brussels.

BORDER GUARDS: TRUCKLOADS OF RUSSIAN TROOPS ARRIVE IN CRIMEA BY FERRY

Russian forces seized control of the border guard checkpoint on the Ukrainian side of the ferry crossing between Russia and Crimea, and began bringing in truckloads of soldiers by ferry on Monday evening, Ukrainian border guards said.

Russians have been surrounding the ferry terminal for days but until now had not taken control of Ukraine's border guard station. A border guards spokesman said Russian troops seized it and brought three truckloads of soldiers across.

"Beginning from 24 February, approximately 16,000 Russian troops have been deployed in Crimea by the military ships, helicopters, cargo airplanes from the neighboring territory of the Russian Federation," Sergeyev said Monday.

"Under the influence of Western countries, there are open acts of terror and violence," Russian Ambassador Vitaly Churkin quoted the letter from Yanukovich to Putin.

"People are being persecuted for language and political reasons," he quoted the letter as saying. "So in this regard I would call on the President of Russia, Mr. Putin, asking him to use the armed forces of the Russian Federation to establish legitimacy, peace, law and order, stability and defending the people of Ukraine."

Churkin held up a copy of the letter for council members to see.

PUTIN'S WAR GAMES

Putin on Monday watched Russian tanks and armored vehicles trundle across a training ground in the northwest part of the country, as Moscow flexed its muscle in a geo-political face-off with the West over Ukraine.

Putin attended the final day of war games he ordered on February 26 to test the combat-readiness of his armed forces in western and central parts of Russia, regions adjacent to Ukraine.

Accompanied by his Defense Minister Sergei Shoigu, Putin flew by helicopter to the Kirillovsky training ground outside Vyborg, a town on Russia's border with Finland.

Putin smiled as he walked towards the command center where he watched tanks, barely visible in thick fog, and listened to artillery fire. He made no comment.

Russia's military exercises come amid tensions in neighboring Ukraine, where Russian forces have effectively taken control of the Crimea region which has an ethnic Russian majority and hosts a Russian naval base.

This has caused an outcry in the West and among Ukraine's new, pro-European leaders in Kiev, as well as a sharp sell-off on Russian markets and a slide in the rouble.

NO ASSAULT ULTIMATUM, DESPITE PRIOR REPORTS

Russia's Black Sea Fleet did not issue an ultimatum to Ukrainian forces in Crimea to surrender by 5 a.m. on Tuesday or face an assault, Interfax news agency quoted an official at the fleet's headquarters as saying.

Russia's Black Sea Fleet has a base in Crimea and Moscow and has effectively established control over the peninsula, which is part of Ukraine.

Interfax had quoted an unnamed source in the Ukrainian Defense Ministry earlier on Monday as saying a deadline to surrender at 0300 GMT had been set by the Black Sea Fleet's commander.

The same news agency later quoted an unnamed representative at the fleet's headquarters as saying no assault was planned, adding: "This is complete nonsense."

Also, on Monday Moscow sharply criticized Western members of the Group of Eight major industrialized nations for suspending preparations for a G8 summit scheduled to be held in the Russian city of Sochi in June over the crisis in Ukraine.

The decision to suspend preparatory work for the summit in the Black Sea resort city of Sochi "has no grounds" and "damages not only the countries of the Group of Eight but also the whole international community," the Russian foreign ministry said.

MARKETS TUMBLE

Russia took a financial hit over its military intervention in neighboring Ukraine, with its markets and currency plunging on Monday as Putin's forces tightened their grip on the Russian-speaking Crimea region.

The Moscow stock market fell by 10 percent and the central bank spent $10 billion of its reserves to prop up the rouble as investors took fright at escalating tensions with the West over the former Soviet republic.

Ukraine said Russia was building up armoured vehicles on its side of a narrow stretch of water closest to Crimea after Putin declared at the weekend he had the right to invade his neighbor to protect Russian interests and citizens.

On the ground in Perevalnoye, half way between the Crimean capital of Simferopol and the Black Sea, hundreds of Russian troops in trucks and armoured vehicles - without national insignia on their uniforms - surrounded two military compounds, confining Ukrainian soldiers as virtual prisoners.

Ukraine called up reservists on Sunday and the United States threatened to isolate Russia economically after Putin's action provoked what Britain's foreign minister called "the biggest crisis in Europe in the twenty-first century".

European Unionforeign ministers were to hold emergency talks on Ukraine on Monday but diplomats said they would not immediately match U.S. threats of sanctions against Moscow, but would focus on diplomatic efforts to prevent escalation.

The Organisation for Security and Cooperation in Europe (OSCE) said it was trying to convene an international contact group to help defuse the crisis after Germany said Chancellor Angela Merkel had convinced Putin to accept such an initiative.

Switzerland, which chairs the pan-European security body, said the contact group would support Ukraine during its transition and coordinate aid and could also discuss sending observers to monitor the rights of national minorities.

GAZPROM HIT

The Russian central bank raised its key lending rate by 1.5 percentage points after the rouble fell to all-time lows against the dollar. The MICEX index of Moscow stocks tumbled 10 percent to 1,294 points. Russian gas monopoly Gazprom, which supplies Europe through Ukraine, was down more than 13 percent.

Gazprom's finance chief warned Ukraine that it may hike gas prices from next month, accusing Kiev of a patchy payments record, but said gas transit to Europe was normal.

Ukraine's Prime Minister Arseny Yatseniuk, head of a pro-Western government that took power when former president Viktor Yanukovich, a Russian ally, fled on February 21 after three months of street protests against his rule, said Putin had effectively declared war on his country.

Western leaders have reacted with a barrage of warnings to Putin against armed action, threatening economic and diplomatic consequences if Moscow goes further, but are not considering any military response.

A Ukrainian border guard spokesman said on Monday that Russian ships had been moving in and around the Crimean port city of Sevastopol, where the Russian Black Sea Fleet has a base, and that Russian forces had blocked mobile telephone services in some parts of Crimea.

He said Moscow was building up its armor near a ferry port on Russia's side of the three-mile-wide Kerch straight, which separates Crimea from Russia.

"There are armoured vehicles on the other side of the strait. We can't predict whether or not they will put any vehicles on the ferry," the spokesman said by telephone.

On Sunday they surrounded several small Ukrainian military outposts there and demanded the Ukrainian troops disarm. Some refused, leading to stand-offs, although no shots were fired.

All eyes are now on whether Russia makes a military move in predominantly Russian-speaking eastern Ukraine, where pro-Moscow demonstrators have marched and raised Russian flags over public buildings in several cities in the last two days.

Russia has staged war games with 150,000 troops along the land border, but so far they have not crossed. Kiev says Moscow is orchestrating the protests to justify a wider invasion.

Ukraine's security council ordered the general staff to immediately put all armed forces on highest alert. However, Kiev's small and underequipped military is seen as no match for Russia's superpower might.

U.S. Secretary of State John Kerry condemned Russia for what he called an "incredible act of aggression" and threatened "very serious repercussions".

G8 countries and other nations were prepared to "to go to the hilt to isolate Russia" if Moscow made the wrong choices in Ukraine, Kerry told CBS program Face the Nation.

"They are prepared to isolate Russia economically. The rouble is already going down. Russia has major economic challenges," he said. He mentioned visa bans, asset freezes and trade isolation as possible steps.

While the EU and NATO stepped up verbal pressure on Moscow, a German spokesman said Merkel believed it was not too late to resolve the Ukrainian crisis by political means despite differences of opinion between Putin and the West.

The German leader, who speaks fluent Russian, has had several long telephone calls with the German-speaking Putin since the crisis erupted with mass protests in Kiev.

"There is no doubt President Putin has a completely different view on the situation and events in Crimea from the German government and our Western partners," spokesman Steffen Seibert told reporters. But he added: "It is still not too late to resolve this crisis peacefully by political means."

U.N. Secretary-General Ban Ki-moon said he would ask Russia's foreign minister at a meeting in Geneva to refrain from acts or rhetoric that would further escalate the crisis. He was sending his deputy to convey the same message to the Ukrainian authorities in Kiev, he said.

So far, the Western response has been largely symbolic. Obama and others suspended preparations for a G8 summit in Sochi, where Putin has just finished staging his $50 billion winter Olympic games. Some countries recalled ambassadors. Britain said its ministers would stay away from the Paralympics due next in Sochi.

With the confrontation in Crimea having remained bloodless for days, a mood of imminent catastrophe has begun to ebb in Kiev, but many people are still on edge.

On Kiev's Independence Square, known as the Maidan, where protesters manned barricades for three months to bring down Yanukovich, the morning crowds were smaller than in the past few days as people returned to work.

"Crimea, we are with you!" read one placard. "Putin - Hitler of the 21st century," read another.

Sergei Lavreynenko, 44, a librarian from Kiev, said Ukrainians were ready to take up arms to defend the country, and were frustrated at mixed messages from the authorities.

"Of course we are all ready to go," he said next to a display of homemade mortar tubes and molotov cocktails used in the uprising against Yanukovich. "We have all served in the military. We have military specialisms. If we can build our own mortar tube like that, we can do even better.... But it needs to be organized. You can't just get a bunch of guys, grab sticks and clubs and race off to Crimea."

Britain's International Institute of Strategic Studies estimates Kiev has fewer than 130,000 troops under arms, with planes barely ready to fly and few spare parts for a single submarine.

Russia, by contrast, has spent billions under Putin to upgrade and modernize the capabilities of forces that were dilapidated after the breakup of the Soviet Union. Moscow's special units are now seen as equals of the best in the world.